Policy: Bush is expected to propose an interim Palestinian state this week. But among his advisors, rifts remain over how specific to be.

WASHINGTON -- President Bush huddled with his foreign policy team Monday in an attempt to build consensus among his advisors as he prepares to unveil a plan for breaking the deadlock in the Middle East peace process, according to U.S. officials and diplomats from the region.

Significant differences within the administration were not settled during intense weekend meetings, and Bush is now personally involved in sorting through the options. "They're still building consensus on the best approach," said an administration official who asked to remain anonymous.

This week, Bush is expected to announce a proposal to create an interim Palestinian state, a plan aimed at promoting rapid political reforms by Palestinian leaders and at undercutting extremists.

The White House hopes such developments would both reassure Israel and marginalize Palestinian Authority President Yasser Arafat.

But well-placed sources said there are major differences within the administration over whether Bush should outline a timeline for the creation of a permanent state; over the final borders of the new entity; and over how to proceed through the interim phase.

Indeed, the fundamental dilemma is just how specific to be. "The vaguer Bush is, the harder the proposal will be to sell. And the more specific he is, the harder it will be to get agreement from either side," said Martin Indyk, a former ambassador to Israel.

"The greatest threat," he said, "is that the president will announce something that is then denounced by both sides and is therefore dead on arrival."

The State Department has been pushing for specificity on borders and some form of a timeline for a permanent state. But Vice President Dick Cheney's office and the Pentagon have argued that performance by the Palestinians should determine progress toward such a state. Unlike in past administrations, the Pentagon has played a more direct role in the current debate.

At the last minute, Arafat's administration put forward its own proposal over the weekend in a meeting between Planning Minister Nabil Shaath and Secretary of State Colin L. Powell, according to U.S. and Palestinian officials. Shaath proposed a plan for a permanent state that would involve one year of negotiation and one year of implementation.

The Arab world, led by Saudi Arabia and Egypt, has proposed a timeline of two to three years, with a permanent state by early 2005. In contrast, Israeli Prime Minister Ariel Sharon wants no timeline. He argues that the Palestinians should meet strict security and political conditions before any type of statehood is considered.

The behind-the-scenes debate in Washington comes as a major tiff brews between the United States and the Palestinians over criticism of Arafat by National Security Advisor Condoleezza Rice.

In a recent interview with the San Jose Mercury News, Rice charged that Arafat's government is "corrupt and cavorts with terror" and "is not the basis for a Palestinian state moving forward."

Rice said the administration does not look at the new U.S. approach as a bid to reform the Palestinian Authority but as "building the institutions of a state that will be capable of actually moving to statehood."

Arafat shot back Monday that how reform should be implemented and by whom are "purely a Palestinian matter."

"The Palestinian Authority will act according to its people's interests and will not receive orders from anyone," he told reporters as he toured a high school in the West Bank city of Ramallah.

Political tensions are rising in the region in anticipation of Bush's announcement, with opposition already forming on both sides.

Arafat will not readily go along with an interim state proposal, according to U.S. and Middle East sources.

Palestinians insisted Monday that the only way to break the deadlock with Israel is to move to talks on a final settlement immediately, including a deadline for Israel's withdrawal from territories occupied during the 1967 Middle East War and the dismantling of all Jewish settlements in those areas, which include the West Bank, the Gaza Strip and the Golan Heights.

"They're trying to beat Arafat at a game he's been playing for 40 years," said a Middle Eastern diplomat in Washington who asked for anonymity. "It's like playing a one-on-one with Shaquille O'Neal. It'll be hard to marginalize Arafat on his own court."

There also is concern among Israelis about Bush's announcement.

The only senior Israeli official to indicate support for the interim-state concept has been dovish Foreign Minister Shimon Peres.

Speaking in Bulgaria on Monday, Peres said that the state Bush is expected to propose would function as a true nation but with undefined borders.

"We call it a provisional state, but only the borders are provisional, nothing else," Peres said. He said he had reached an understanding with Palestinian officials for a state to begin functioning "within eight weeks."

But Peres conceded that the Israeli government had neither accepted nor rejected that plan.

Israel Television quoted unidentified senior Israeli sources Monday night as saying that there is virtually no support in the Sharon Cabinet for an interim Palestine.

Disputes already have erupted within Sharon's broad-based government over construction of a fence roughly along a portion of the pre-1967 border between Israel and the West Bank. Work on the fence officially began Sunday, after months of debate.

Right-wing Cabinet members protested that the concrete walls and electronic barricades eventually will become the political boundaries of the Palestinian state. Left-wing and centrist members say the barricades are needed to protect Israelis from suicide bombers.

A call from Bush to establish a Palestinian state in the West Bank is sure to further exacerbate tensions within the fractious body.